North Korea to target U.S. with nuclear, rocket tests

SEOUL (Reuters) - North Korea said on Thursday it would carry out further rocket launches and a nuclear test that would target the United States, dramatically stepping up its threats against a country it called its "sworn enemy".

The announcement by the country's top military body came a day after the U.N. Security Council agreed to a U.S.-backed resolution to censure and sanction North Korea for a rocket launch in December that breached U.N. rules.

North Korea is not believed to have the technology to deliver a nuclear warhead capable of hitting the continental United States, although its December launch showed it had the capacity to deliver a rocket that could travel 10,000 km (6,200 miles), potentially putting San Francisco in range, according to an intelligence assessment by South Korea.

"We are not disguising the fact that the various satellites and long-range rockets that we will fire and the high-level nuclear test we will carry out are targeted at the United States," North Korea's National Defence Commission said, according to state news agency KCNA.

North Korea is believed by South Korea and other observers to be "technically ready" for a third nuclear test, and the decision to go ahead rests with leader Kim Jong-un, who pressed ahead with the December rocket launch in defiance of the U.N. sanctions.

China, the one major diplomatic ally of the isolated and impoverished North, agreed to the U.S.-backed resolution and it also supported resolutions in 2006 and 2009 after Pyongyang's two earlier nuclear tests.

Thursday's statement by North Korea represents a huge challenge to Beijing as it undergoes a leadership transition, with Xi Jinping due to take office in March.

China's Foreign Ministry called for calm and restraint and a return to six-party talks, but effectively singled out North Korea, urging the "relevant party" not to take any steps that would raise tensions.

"We hope the relevant party can remain calm and act and speak in a cautious and prudent way and not take any steps which may further worsen the situation," ministry spokesman Hong Lei told reporters at a regular press briefing.

North Korea has rejected proposals to restart the talks aimed at reining in its nuclear capacity. The United States, China, Russia, Japan and the two Koreas are the six parties involved.

"After all these years and numerous rounds of six-party talks we can see that China's influence over North Korea is actually very limited. All China can do is try to persuade them not to carry out their threats," said Cai Jian, an expert on Korea at Fudan University in Shanghai.

Analysts said the North could test as early as February as South Korea prepares to install a new, untested president or that it could choose to stage a nuclear explosion to coincide with former ruler Kim Jong-il's Feb 16 birthday.

"North Korea will have felt betrayed by China for agreeing to the latest U.N. resolution and they might be targeting (China) as well (with this statement)," said Lee Seung-yeol, senior research fellow at Ewha Institute of Unification Studies in Seoul.

U.S. URGES NO TEST

Washington urged North Korea not to proceed with a third test just as the North's statement was published on Thursday.

"Whether North Korea tests or not is up to North Korea," Glyn Davies, the top U.S. envoy for North Korean diplomacy, said in the South Korean capital of Seoul.

"We hope they don't do it. We call on them not to do it," Davies said after a meeting with South Korean officials. "This is not a moment to increase tensions on the Korean peninsula."

The North was banned from developing missile and nuclear technology under sanctions dating from its 2006 and 2009 nuclear tests.

A South Korean military official said the concern now is that Pyongyang could undertake a third nuclear test using highly enriched uranium for the first time, opening a second path to a bomb.

North Korea's 2006 nuclear test using plutonium produced a puny yield equivalent to one kiloton of TNT - compared with 13-18 kilotons for the Hiroshima bomb - and U.S. intelligence estimates put the 2009 test's yield at roughly two kilotons

North Korea is estimated to have enough fissile material for about a dozen plutonium warheads, although estimates vary, and intelligence reports suggest that it has been enriching uranium to supplement that stock and give it a second path to the bomb.

According to estimates from the Institute for Science and International Security from late 2012, North Korea could have enough weapons grade uranium for 21-32 nuclear weapons by 2016 if it used one centrifuge at its Yongbyon nuclear plant to enrich uranium to weapons grade.

North Korea has not yet mastered the technology needed to make a nuclear warhead small enough for an intercontinental missile, most observers say, and needs to develop the capacity to shield any warhead from re-entry into the earth's atmosphere.

North Korea gave no time-frame for the coming test and often employs harsh rhetoric in response to U.N. and U.S. actions that it sees as hostile.

The bellicose statement on Thursday appeared to dent any remaining hopes that Kim Jong-un, believed to be 30 years old, would pursue a different path from his father, Kim Jong-il, who oversaw the country's military and nuclear programs.

The older Kim died in December 2011.

"The UNSC (Security Council) resolution masterminded by the U.S. has brought its hostile policy towards the Democratic Peoples Republic of Korea (North Korea) to its most dangerous stage," the commission was quoted as saying.

(Additional reporting by Christine Kim in SEOUL, Ben Blanchard and Sui-Lee Wee in Beijing; Writing by David Chance; Editing by Raju Gopalakrishnan and Ron Popeski)

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Russia's Putin says regional revolts led to Algeria hostage

MOSCOW (Reuters) - Russian President Vladimir Putin said on Thursday that revolts in Syria and Libya had unleashed instability in the Middle East and Africa that had exacted a "tragic toll" in last week's militant attack on a gas plant in Algeria.

Putin and other Russian officials have said the United States and its NATO allies have sacrificed stability to their political ambitions in the Middle East and North Africa, often playing into the hands of radical Islamists.

Algerian militant leader Mokhtar Belmokhtar said his forces seized the In Amenas gas plant in the name in retaliation for France's offensive against his allies in neighboring Mali. At least 38 workers were killed as Algerian troops stormed the remote gas complex.

While Russia backed a U.N. Security Council resolution in December authorizing intervention to stop Mali falling to al Qaeda, it has blocked three resolutions on Syria and accused the West of over-stepping the mandate of a U.N. resolution on Libya that its abstention allowed to pass.

"The Syrian conflict has been raging for almost two years now. Upheaval in Libya, accompanied by the uncontrolled spread of weapons, contributed to the deterioration of the situation in Mali," Putin said.

"The tragic consequences of these events led to a terrorist attack in Algeria which took the lives of civilians, including foreigners," he told new foreign ambassadors who handed him their credentials in a Kremlin ceremony.

During his annual news conference on Wednesday, Foreign Minister Sergei Lavrov said rebels fighting French and African troops in Mali were the same fighters the West armed in the revolt that ousted Gaddafi.

(Writing by Gabriela Baczynska; Editing by Jon Hemming)

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Israeli voters force Netanyahu to seek centrist partner

JERUSALEM (Reuters) - Israel's next government must heed voters and devote itself to bread-and-butter issues, not thorny foreign policy problems such as Iran's nuclear plans and the Palestinian conflict, senior politicians said on Thursday.

Israelis worried about housing, prices and taxes have reshaped parliament, forcing Prime Minister Benjamin Netanyahu to woo their centrist champion as his main coalition partner.

Final results from the January 22 national election were due later on Thursday, but were not expected to differ significantly from published projections.

Defense Minister Ehud Barak told CNN that voters had imposed new constraints on the next government.

"It will be much more balanced, probably limited, cannot do whatever it wants and will have to take into account the growing pressure from within to focus on many internal issues," he said.

Yair Lapid, the surprise success of Tuesday's ballot, stormed to second place with 19 seats in the 120-member assembly against 31 for Netanyahu's alliance of his Likud party ultra-nationalists led by former Foreign Minister Avigdor Lieberman.

Formal coalition talks have yet to begin, but Netanyahu swiftly adopted chunks of Lapid's election platform as his own after the poll, keen to seal a deal that would create a solid base of 50 seats before drawing in other partners from the right or centre needed for a stable ruling majority.

Lapid said "color had returned to the cheeks" of Israelis following the vote, adding that he was happy Netanyahu had now embraced his party's themes of "equal sharing of the burden" and helping the middle class, especially with housing and education.

"Equal sharing" is political code for meeting the complaints of secular tax-payers about the concessions given to the ultra-Orthodox, whose menfolk study in Jewish seminaries, often on state stipends, and who are not drafted into the army.

"EQUAL BURDEN"

Lulled by pre-election opinion polls, Netanyahu may have assumed he could coast back to power at the head of a right-wing coalition enthused by his mission to halt Iran's nuclear drive and eager to settle more Jews in the occupied West Bank.

But his Likud party and Lieberman's Yisrael Beitenu lost 11 of the seats they had won at the last election in 2009, punished by voters more preoccupied with problems of daily life.

Lieberman said he and Netanyahu shared with Lapid and Naftali Bennett, leader of a new far-right party, the goals of "equal burden, living costs and affordable housing".

But Lieberman told Army Radio reaching a similar consensus on foreign policy might prove elusive. "We can start with diplomacy, but that will impair the government's functioning," he said. "This government must focus on domestic issues."

In its first reaction to the election, the United States, Israel's chief ally, renewed a call for resuming stalled peace talks with the Palestinians, but huge obstacles remain, even if the next Israeli government gains a more moderate flavor.

Yasser Abed Rabbo, a member of the PLO executive committee, said Palestinian leaders were watching for change after a vote that had given Israel a "new and different opportunity".

He told reporters any renewed talks must be based on creating a Palestinian state on the pre-1967 war lines.

"We are not ready to be part of the process of more political theatre or to give cover for government policy which represents the same policies as the last one, while settlements continue and we experience daily killing and repression."

U.S.-brokered peace talks broke down in 2010 amid mutual acrimony. Since then Israel has accelerated construction in the West Bank and east Jerusalem - land the Palestinians want for their future state - much to the anger of Western partners.

RAZOR-THIN

Complicating Netanyahu's quest for a workable coalition is the difficulty of reconciling the demands of a dozen factions in parliament, where those on the right hold a razor-thin edge.

Lapid, a former TV anchorman who only founded his Yesh Atid (There is a Future) party a year ago, seeks to end exemptions from military service for Israel's 10 percent minority of ultra-Orthodox Jews who also receive generous state benefits.

Those privileges were extracted from successive governments by religious parties such as Shas and the United Torah Party in exchange for their backing. The two parties have a combined total of 18 seats in parliament, and Netanyahu is likely to want to include at least one of them for a broad-based coalition.

He may also turn to the hardline Jewish Home group led by his former protege Bennett, a millionaire software entrepreneur, which won a projected 12 seats.

"Jewish Home can certainly be one of the desired partners in the new coalition," Likud lawmaker Zeev Elkin told Israel Radio.

However, Bennett has denounced the idea of Palestinian statehood and advocates annexing swathes of the West Bank, putting him at odds with Lapid, who wants "divorce" talks with the Palestinians to end the decades-old Middle East conflict.

The Labour party, which came third with 15 seats after putting economic and social issues at the forefront of its campaign, not the Middle East peacemaking it once championed, has vowed not to join any Netanyahu-led coalition.

Once official results are announced on January 30, President Shimon Peres will ask someone, almost certainly Netanyahu, to try to form a government, a process that may take several weeks.

(Reporting by Jerusalem bureau; Editing by Peter Graff)

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UK urges Britons to leave Libya's Benghazi over threat

TRIPOLI/LONDON (Reuters) - Britain urged its nationals to leave the eastern Libyan city of Benghazi on Thursday, citing a "specific and imminent" threat to Westerners days after a deadly attack by Islamist militants in neighboring Algeria.

Britain's Foreign Office declined to give details of the nature of the threat, but has warned in the past of the long reach of al Qaeda in the Islamic Maghreb, the North African wing of al Qaeda.

At least 38 hostages were killed in an attack on the remote In Amenas gas complex in Algeria, about 100 kms (60 miles) from the Libyan border. French forces are also fighting Islamist rebels in Mali.

"We are now aware of a specific and imminent threat to Westerners in Benghazi, and urge any British nationals who remain there against our advice to leave immediately," the Foreign Office said in a statement.

Few Westerners are believed to be in Benghazi, which has experienced a wave of violence targeting foreign diplomats, military and police officers, including an attack in September that killed the U.S. ambassador and three other Americans.

A spokeswoman for the British embassy in Tripoli said the number of British nationals in Benghazi was small, but could not comment on specific numbers.

Last week Italy suspended activity at its Benghazi consulate and withdrew staff after a gun attack on its consul.

Coupled with the Algeria hostage crisis - a plan believed to have been conceived in Mali - Western governments are now on high alert.

"The situation in Cyrenaica (eastern Libya) is not just worrying, it is incredibly worrying. Everybody is on alert," a Western diplomat said. "But in light of the events recently (in Algeria and Mali), this could be a precautionary measure."

Saad al-Saitim, deputy head of the Benghazi Local Council, said the warning was a setback, inciting "more fear at a time when people need to stand with us".

"Following the Mali events, foreigners are worried and are taking precautionary steps. Benghazi hardly has any foreigners at the moment and few foreign consulates," he said.

British Airways said it would continue operating flights to the Libyan capital Tripoli. The airline operates three flights a week between London's Heathrow airport and Tripoli. Its next flight to Libya is scheduled for Sunday.

The eastern city of Benghazi was the cradle of the 2011 revolution that toppled former dictator Muammar Gaddafi, and Libya has been awash with weapons since then, its shaky nascent institutions struggling to rein in armed groups.

Benghazi in particular has been the scene of power struggles between various armed Islamist factions. U.S. intelligence officials say Islamist militants with ties to al Qaeda affiliates were most likely involved in the deadly September 11 assault on the U.S. mission in the city, Libya's second biggest.

While Britain's move may be only precautionary, it is unlikely to inspire confidence in a country keen to attract foreign cash and developers for its oil fields and other sectors after years of chronic under-investment and war.

The bulk of Libya's oil wealth, around 80 percent, is located in the east of the country but the oil installations are far from Benghazi and oil is not piped through there.

Giuma Attaigha, deputy leader of the ruling general national congress, told Reuters Libya must make foreigners feel safe.

"This statement is a cause of concern and we hope it is just precautionary because it is the right of any country to take care of its people when it feels that they are in danger," he said.

"This forces all of us, starting with the security forces in the interior ministry, to take all necessary steps and quickly to make the foreigners feel safe and to protect citizens in Benghazi against terrorism."

(Additional reporting by Rhys Jones, Ali Shuaib in Tripoli and Ghaith Shennib in Benghazi; Writing by Mohammed Abbas; Editing by Myra MacDonald)

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France sees no sign Syria's Assad will be toppled soon

PARIS/BEIRUT (Reuters) - France said on Thursday there were no signs that Syrian President Bashar al-Assad is about to be overthrown, something Paris has been saying for months was just over the horizon.

The uprising against Assad's rule is now almost two years old. 60,000 Syrians have been killed and another 650,000 are now refugees abroad, according to the United Nations.

France, a former colonial ruler of Syria, has been one of the most vocal backers of the rebels trying to topple Assad and was the first to recognize the opposition coalition.

"Things are not moving. The solution that we had hoped for, and by that I mean the fall of Bashar and the arrival of the (opposition) coalition to power, has not happened," Foreign Minister Laurent Fabius said in his annual New Year's address to the press.

Fabius told RFI radio in December "the end is nearing" for Assad. But on Thursday, he said international mediation and discussions about the crisis that began in March 2011 were not getting anywhere. "There are no recent positive signs," he said.

He said Syrian opposition leaders and representatives of some 50 nations and organizations would meet in Paris on January 28 to discuss how to fulfill previous commitments.

Assad has resisted all attempts at forcing him to step down and has led a ruthless crackdown on what he calls a foreign-backed terrorists.

The president was shown on Syrian state television on Thursday visiting a mosque to celebrate the birth of Prophet Mohammad. Assad shook hands with government members and smiled but did not make a speech.

Meanwhile, Syrian army forces bombarded opposition-held areas of the country with artillery and air strikes and insurgents clashes with infantry, opposition activist said.

The Britain-based Syrian Observatory for Human Rights which monitors violence in Syria, said that six civilians, including a woman and two children, were killed in Homs on Thursday when a plane bombed their house.

On the southwestern edge of the capital, artillery hit the rebel-held district of Daraya, residents in Damascus said.

"There was very loud shelling overnight from the mountain onto Daraya," said a resident of central Damascus. Assad's army has used the Qasioun mountain range to the west of Damascus as high ground to shell opposition districts.

"(The explosions) sounded like huge trucks falling from the sky, one huge truck at a time," the resident said on condition of anonymity. "I felt my windows shake."

The army and insurgents have been stuck in a military stalemate for weeks, but rebels have been able to capture some military bases.

This week, rebels took control of a missile base in the country's north, according to opposition footage, potentially gaining access to powerful long-range weapons.

Video posted on the Internet on Wednesday showed images of fuel tanks and at least 17 trucks with mounts for several-meters-long missiles, although they appeared to have had the missiles removed.

"(There are) fuel tanks in addition to missiles and the whole battalion was taken over by the rebels," said a voice off camera. Text accompanying the video said that the Battalion 599 base, 12 miles (20km) south of Aleppo, was overrun on Tuesday.

But the army has fortified positions in the capital and in major military bases and it is rare that either side makes a significant advance.

While France has ruled out sending the rebels weapons, it has pushed the European Union to review its arms embargo.

Paris and other Western allies have so far failed to convince Russia and China, who have continued to block stronger U.N. action against Assad, to change their stance.

"France continues, like others, to try find a solution so that Bashar is replaced and that a united Syria that respects all communities is achieved. However, we are far from it," Fabius said.

(Additional reporting by Reuters TV; Writing by Oliver Holmes; Editing by Jon Hemming)

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Mali Islamists suffer split as Africans prepare assault

MARKALA, Mali/DAKAR (Reuters) - A split emerged on Thursday in the alliance of Islamist militant groups occupying northern Mali as French and African troops prepared a major ground offensive aimed at driving al Qaeda and its allies from their safe haven in the Sahara.

A senior negotiator from the Ansar Dine rebels who helped seize the north from Mali's government last year said he was now part of a faction that wanted talks and rejected the group's alliance with al Qaeda's North African franchise AQIM.

It was unclear how many fighters had joined the new Islamic Movement of Azawad (MIA) faction. But the announcement will encourage international negotiators who have long sought to prise apart the Islamist alliance, seen as a major threat by Washington and other Western and regional powers.

"There has to be a ceasefire so there can be talks," Alghabass Ag Intallah, a member of the Tuareg tribe, told Reuters from the Ansar Dine stronghold of Kidal in northeast Mali. The new MIA would focus its efforts on seeking autonomy for the northern homeland of the desert Tuaregs, he said.

For nearly two weeks, French aircraft have been bombarding Islamist rebel positions, vehicles and stores in the center and north of Mali as a ground force of African troops assembles to launch a U.N.-backed military intervention against the rebels.

The strikes halted a rebel advance further south. French and Malian ground troops have also retaken several towns and have been mopping up after the insurgents avoided a head-on fight, abandoning vehicles and slipping away into the bush.

On Thursday, a Reuters correspondent saw around 160 troops from Burkina Faso deployed in the dusty Malian town of Markala - the first West African troops to link up with French and Malian forces.

REPORTS OF REPRISAL KILLINGS

News of the French and African advances have been overshadowed by allegations from residents and rights groups that Malian government soldiers have executed Tuaregs and Arabs accused of collaborating with the rebels.

Mali's army has denied the allegations and the government ordered the armed forces to respect human rights.

But the reports of killings of lighter-skinned Tuaregs and Arabs by Mali's mostly black army has raised the risk that the internationally-backed intervention against the Islamist fighters in the north could trigger an ethnic bloodbath.

"These people took up arms against us, our colleagues were killed ... I no longer have any Tuareg friends," one Malian soldier, who asked not to be named, told Reuters.

Outside Diabaly, a town of mud-brick huts amid mango trees surrounded by irrigation canals 350 km (220 miles) north of the capital Bamako, Malian army soldiers captured a group of suspected Islamists found hiding in a local house, said a Malian officer, Captain Samasa, who only gave his first name.

The captives were taken away in a truck, witnesses said.

AU SEEKS CHINESE SUPPORT

Diplomats gave the news of the rebel split a guarded welcome. "It is not surprising that there could still be significant rifts between what some call the military faction and the political faction," said a U.S. official, who asked not to be named.

The Islamist alliance in the north holds the major towns of Timbuktu, Gao and Kidal. It groups al Qaeda's North African wing AQIM, Malian militant group Ansar Dine and AQIM splinter MUJWA, and the numbers of its fighters are estimated at roughly 3,000.

Fears that it could pose a threat to African neighbors and Western powers increased sharply last week when al Qaeda-linked Islamist guerrillas opposing the French-led military intervention in Mali briefly seized a gas plant in neighboring Algeria. At least 37 foreign hostages were killed in the incident which ended when Algerian forces stormed the plant.

Reflecting the wider security worries about reprisals, France has ordered special forces to protect uranium sites run by state-owned French company Areva in Mali's neighbor Niger, which supplies uranium for the French nuclear power industry.

Military experts say a fast, efficient deployment of the African ground force, expected to eventually number more than 5,000, is essential to sustain the momentum of the French operations in Mali. The operation will be high on the agenda of an African Union summit in Ethiopia's capital Addis Ababa this weekend.

Most of the African troops for the Mali intervention are coming from member countries of the West African regional grouping ECOWAS, such as Benin, Nigeria, Senegal, Togo and Niger. But the deployment also includes soldiers from Chad who are experienced in desert warfare.

El-Ghassim Wane, director of the AU's Peace and Security Council, said Burundi was also offering troops.

But serious questions have arisen over whether the African force being deployed has the weapons, equipment and training needed to maintain a sustained campaign against the rebels in a desert and mountain battleground the size of Texas.

"It's a process that unfortunately takes a bit of time> Its never as easy as anyone would like it to be. But the political will is there, the commitment is there," Wane said.

International donors are due to meet in Addis Ababa on January 29 to discuss the African military operation in Mali, and France said they would be asked to provide about 340 million euros ($452 million).

Wane said that besides the West, the AU was also looking for financial and material support from China for the Mali operation. China was already backing an African peacekeeping operation in Somalia, he added.

(Additional reporting by John Irish, Geert de Clercq, Muriel Boselli and Michel Rose in Paris, Aaron Maasho and Richard Lough in Addis Ababa; Writing by Pascal Fletcher and Daniel Flynn; Editing by Andrew Heavens)

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Israel expected to boycott U.N. rights scrutiny session - U.S

GENEVA (Reuters) - Israel is expected to boycott the U.N. Human Rights Council next week despite the United States urging its ally to show up for an examination of its record, the U.S. ambassador said on Thursday.

The Jewish state is scheduled to be in the dock of the Geneva rights forum on Tuesday, January 29 as part of the Universal Periodic Review (UPR) process, the council's regular scrutiny of all United Nations member states.

"They (Israeli officials) signaled that they want it postponed. It is very unlikely they will participate on the 29th," U.S. human rights ambassador Eileen Chamberlain Donahoe told reporters in Geneva.

"I'm fairly optimistic we will find a solution that does not undermine universality or cooperation. That is my hope."

Israel's last review was in December 2008, when it attended. A boycott would be unprecedented and diplomats fear other countries might follow suit to avoid scrutiny of their human rights records.

Israel suspended relations with the council last May because of what it called an inherent bias against it, and has informally told the council's president, Poland's ambassador, that it wants the session postponed, a U.N. spokesman said.

"A decision will be taken in the event Israel does not show up for its UPR, the council will decide on a course of action. States are working very hard behind the scenes to come up with a solution," council spokesman Rolando Gomez told Reuters.

Islamic states, often led by Pakistan and Iran in the forum, would have to agree to any postponement of the examination of Israel's record. The next UPR sessions are in April and October.

A team of U.N. investigators, set up by the council last year, is due to report soon on whether Jewish settlements in the Palestinian territories violate international human rights law. Washington cast the only vote against the initiative brought by the Palestinian Authority.

The United States was re-elected by the U.N. General Assembly in November to the 47-member state forum, which it first joined in 2009 after the Bush administration snubbed it.

"We see a strong bias against Israel that has not gone away," Donahoe said on Thursday.

But Washington has urged its ally to take part in the UPR whose universality it does not want to see "broken", she said.

"We have encouraged Israel to come to the UPR, to tell its story, to present its own narrative of its human rights situation. We think it is a good opportunity to do that."

Donahoe added: "My feeling is members understand that it is not only about Israel."

(Reporting by Stephanie Nebehay; editing by Andrew Roche)

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Turkish court convicts sociologist over 1998 blast: media

ISTANBUL (Reuters) - A Turkish court sentenced a sociologist on Thursday to life in prison for involvement in a deadly 1998 explosion after three previous acquittals, media reports said, in a case which has raised concerns about judicial process in Turkey.

Broadcaster CNN Turk said the court had issued an arrest warrant for Pinar Selek, who lives in France.

Selek had been charged with planting a bomb in Istanbul's Ottoman spice bazaar, which killed seven people and wounded more than 100 in July 1998.

Human Rights Watch has described the case as a "travesty of justice", saying there was substantial evidence that the explosion had been due to an accidental gas leak.

Selek worked as a sociologist researching Kurdish issues in the mid-to-late 1990s and had contact with the outlawed militant Kurdistan Workers Party (PKK), designated a terrorist group by Turkey, the European Union and the United States.

She was arrested in July 1998 at the age of 27 and released two and a half years later after a team of experts concluded the explosion had not been caused by a bomb but by the accidental ignition of a gas cylinder.

Despite these findings, the case against Selek continued and she was acquitted in 2006, 2008 and most recently in 2011. The prosecutor appealed each time and the appeals court ordered a retrial.

(Writing by Daren Butler; Editing by Jon Hemming)

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Greek subway workers told: end strike or face arrest

ATHENS (Reuters) - Greece's government ordered striking transport staff back to work on Thursday, threatening them with arrest if they refuse to end an eight-day walkout that has paralyzed the Athens subway.

Workers said they would defy the order, issued under emergency legislation the conservative-led government invoked for the first time since taking power in June.

The strike is the latest test for Greece's fragile coalition as it faces down the unions to implement austerity measures demanded by foreign lenders as the price for bailout funds.

"Neither the government nor society can be held hostage to union mentality," Development Minister Kostis Hatzidakis said after five hours of talks with Prime Minister Antonis Samaras.

"The government can't ignore this. There is nothing else we can do."

But in a sign of the coalition's fragility, the move was criticized from within its own ranks as the smallest party in the three-party government called it "extreme".

"At a time when society is under such pressure, every option to reach an agreement must be exhausted first," the Democratic Left party said in a statement. "Being uncompromising - on both sides - does not help."

Samaras, however, refused to back down.

"The Greek people have made enormous sacrifices and I will not allow exceptions. Transport does not belong to the unions - it belongs to the people and they have the right to use it," he said in a statement.

Public anger has grown against the strike which affects more than half a million commuters in the city of 5 million people. Some Athenians said their daily commute time had tripled and many were having to pay for costly taxi rides.

A hailstorm and a bus strike worsened disruptions during the Thursday evening rush hour, causing long queues for taxis and leaving crowds huddled under bus shelters.

"The workers are taking advantage of their union power while the ordinary commuter, who is unprotected, is being punished," said Antonis Demetriadis, 40, who works in a marketing company.

"Who is going to protect me? Would they care if my pay is cut?"

DEFIANT

When the same emergency law was invoked against truck drivers in 2010, workers obeyed the order to return to work after a week-long strike that had disrupted fuel supplies and emptied gas stations. But the subway workers were defiant and other unions voiced their support.

"We will not back down, we will resist," one union leader, Antonis Stamatopoulos, told Reuters after addressing workers at a subway station in the working-class neighborhood of Sepolia.

Subway workers, who have defied a court order to return to work, oppose being included in a unified wage scheme for public sector workers that would slash their salaries.

"It's not that subway workers went crazy over the last eight days. We exhausted every possibility before going on strike. We've reached our limits. We've run out of patience," said Manthos Tsakos, general secretary of the metro workers' union.

Bus, railways workers and seafarers said they would walk off the job in the coming days in solidarity with subway workers as major unions expressed their support.

Greece's largest private and public labor unions GSEE and ADEDY, representing about 2 million workers, said they would hold a 24-hour strike in February to protest the government's belt-tightening policies.

"This government is out of control," said ADEDY General Secretary Ilias Iliopoulos. "Taking decisions that are usually taken in extreme political situations is absurd, especially in a country that gave birth to democracy."

Greece, kept afloat solely by foreign aid, averted financial collapse in December when its euro zone partners agreed to keep funds flowing but insisted on unpopular reforms that have driven up unemployment to record levels and fuelled anger against the government.

A poll by Pulse for To Pontiki newspaper on Thursday showed the radical leftist opposition Syriza would win with 24 percent of the vote if elections were held today, while Samaras's New Democracy party would trail with 22.5 percent.

(Additional reporting by Renee Maltezou and George Georgiopoulos; Editing by Deepa Babington and Robin Pomeroy)

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China busts sex video blackmailers who targeted officials

BEIJING (Reuters) - Chinese police in the inland port city of Chongqing have busted a ring that extorted local officials with secretly-filmed video of their encounters with young women, the state-run Xinhua news agency said on Thursday.

Late last year, graphic video footage of the party secretary of Chongqing's Beibei district in a rendezvous with a young woman was widely circulated on the Chinese internet. The official, Lei Zhengfu, was later sacked.

Ten other officials were removed from their posts after appearing in similar videos, Xinhua said. They include county and district level officials and the heads of state-owned firms.

China is engaging in an anti-corruption drive that has so far netted low-level officials, after the purge of Chongqing party secretary and populist politician Bo Xilai in March drew unprecedented attention to the wealth garnered by elite political families tied to the ruling Communist party.

Chinese media said earlier that Lei had been entrapped by a construction company attempting to pressure him into granting contracts.

(Reporting by Lucy Hornby; Editing by Jon Hemming)

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Japan's Abe in Thailand to talk economic ties, security

BANGKOK (Reuters) - Japanese Prime Minister Shinzo Abe visited Thailand on Thursday, part of a three-country Southeast Asian tour to consolidate business ties in one of the world's fastest-growing regions and counter growing Chinese assertiveness.

Tension remains high over China's claims on parts of the strategically vital and mineral-rich South China Sea that are also claimed by four Southeast Asian countries including Vietnam, which Abe visited on Wednesday.

Abe and his Thai counterpart Yingluck Shinawatra gave no indication at a news conference after talks whether any progress had been made on this issue, making only general comments about security that did not mention the South China Sea.

The Japanese premier leaves for Jakarta on Friday, where he is expected to give a major policy speech.

Relations between Tokyo and Beijing have been frosty since a dispute over islands in the East China Sea, known as Senkaku in Japan and Diaoyu in China, flared up last year. Violent anti-Japanese protests have been staged in Chinese cities.

"China has successfully built up its own military power but for what? We celebrate China's economic growth but it's not a good idea to threaten others or urge others by coercion or intimidation," Yutaka Yokoi, a Japanese foreign ministry official, told Reuters in Bangkok.

Having taken on the role of mediator in the multi-layered South China Sea disputes, Thailand has said it would listen to what Japan has to say but would also take into consideration the views of other countries involved.

Analysts have said Abe will have to tread carefully in Southeast Asia to avoid provoking China by appearing to be trying to "contain" it. Moreover, his hosts will be keen to avoid upsetting China, now their major economic partner.

In Hanoi on Wednesday, Abe, on his first foreign trip since sweeping to power last month, agreed with Vietnamese Prime Minister Nguyen Tan Dung that disputes in the region should be solved through peaceful talks and international law.

FLOOD PREVENTION

Already one of the biggest foreign investors in Southeast Asia and the largest in Thailand, with its firms pouring 312 billion baht ($10.5 billion) into the country in 2012, Japan is keen to step up its economic presence in the region.

Abe's visit to Bangkok is the first by a Japanese prime minister in 11 years and comes as more Japanese firms look at setting up shop in the emerging economies of Southeast Asia because of the soured climate in China.

Thailand is not without problems: in addition to serious, disruptive bouts of political unrest in the past few years, it suffered its worst floods in half a century in 2011, with flood walls at seven huge industrial zones breached.

That disrupted the supply chains of big Japanese firms such as car maker Toyota Motor Corp.

"This is our opportunity to reassure Japan that we are serious about flood prevention and to reiterate that the 350 billion baht ($11.72 billion) we pledged for flood management will continue to focus on early warning systems," said Damrong Kraikuan, director-general of the Thai foreign ministry's East Asia Affairs department.

Japan is showing huge interest in Myanmar, which borders Thailand and is opening up after decades of military rule.

Thai officials said Abe's trip would be an opportunity to discuss Japanese involvement in the $50 billion Dawei economic zone in southern Myanmar, which is being developed by Thailand's Italian-Thai Development Pcl.

The project has struggled to secure the initial $8.5 billion needed to finance infrastructure and utilities.

"Thailand has invited Japan to join and invest in the Dawei project in Myanmar and we hope Japan will join our two countries in this endeavor," Yingluck told the news conference.

Abe described Thailand as "the gateway to Southeast Asia" but made no comment on Dawei. Neither he nor Yingluck took questions, simply reading prepared statements.

In September a source close to the Dawei project said a state-backed Japanese soft loan totaling $3.2 billion was being secured to help kick-start construction on basic port and road infrastructure.

Ministers from Thailand and Myanmar met in November and said funding for the project's first phase would be decided by February, with construction set to begin no later than April.

Yokoi from the Japanese foreign ministry suggested Tokyo was treading carefully on the project.

"We are willing to see the outcome from the talks between Thailand and Myanmar and would like to be kept informed but we still don't know what the size of investment or opportunities will be," he said. ($1 = 29.8600 Thai baht)

(Editing by Alan Raybould, Raju Gopalakrishnan and Patrick Graham)

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Kazakhstan may join WTO this year: WTO chief Lamy

MOSCOW (Reuters) - Kazakhstan may join the World Trade Organisation this year, WTO director general Pascal Lamy said on Thursday.

"Kazakhstan is at an advanced stage of its accession negotiation. My guess is that this could be doable this year," he told reporters on the sidelines of the Gaidar Forum, an economic conference in Moscow.

Kazakhstan applied to join the WTO in 1996. The oil-rich Central Asian state is one of the few countries in the world that remains outside the international trading club. Membership is expected to boost the Kazakh economy by opening it to foreign investors.

Kazakhstan's neighbor Russia was admitted to the WTO last August after 18 years of negotiations.

Lamy played down suggestions that Russia's WTO membership was not proceeding smoothly, following signs over recent months of possible trade disputes with the European Union, Russia's major trading partner.

"We don't judge results of a WTO accession that lasted 18 years in six months. Time will say whether or not it worked," he said.

(Reporting by Maya Dyakina; Writing by Jason Bush; Editing by Robin Pomeroy)

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Pakistan warns anti-government cleric to end protest

ISLAMABAD (Reuters) - Pakistan's interior minister on Wednesday warned an anti-government Muslim cleric and thousands of protesters camped out near parliament to disperse, saying they were at risk of attack by militants.

Rehman Malik said authorities had learned militants might be planning to target the crowd, and that the cleric, Muhammad Tahirul Qadri, would be held responsible for any attacks.

"The best commandos are with me today," Malik told a news conference, saying security forces could take action against Qadri within the next two days to prevent "expected terrorism".

"I hope that he listens to me."

Qadri, who backed a military coup in 1999, is calling for the immediate resignation of the government and the installation of a caretaker administration to oversee electoral reforms.

The government was rocked on Tuesday by a Supreme Court order for the arrest of Prime Minister Raja Pervez Ashraf within 24 hours on suspicion of corruption.

Qadri's appearance at the forefront of Pakistan's political scene has fuelled speculation that the army, which has a long history of involvement in politics, has tacitly endorsed his campaign in an effort to pile more pressure on a government it sees as inept and corrupt.

Qadri and the military deny this.

Pakistan's information minister Qamar Zaman Kaira said political leaders would not bow to Qadri's demands.

"All political parties are happy with the Election Commission and elections will happen on time," he said.

He added that elections would take place as scheduled between May 5 and 15.

The opposition Pakistan Muslim League led by former prime minister Nawaz Sharif also rejected Qadri's call for the military to play a role in the formation of a caretaker government to oversee the run-up to elections.

"Tahirul Qadri is working on somebody's agenda to derail democracy in Pakistan and we reject all of his demands," Sharif told a news conference.

Qadri's appeal has cast fresh uncertainty over the government's effort to become the first civilian Pakistani administration to complete a full term.

The military has ruled Pakistan for over half of its 65 years since independence. Current chief General Ashfaq Kayani has vowed to keep the military out of politics.

Prime Minister Ashraf remained a free man on Wednesday since officials said the National Accountability Bureau (NAB), which would carry out the arrest, had not yet received direct orders.

The officials said the NAB chief would go the Supreme Court on Thursday to discuss the issue.

The ruling coalition, led by the Pakistan People's Party, has a majority in parliament and its lawmakers can simply elect another prime minister if Ashraf is ousted.

In June, Ashraf replaced Prime Minister Yusuf Raza Gilani, who was disqualified by the Supreme Court in a previous showdown between the government and the judiciary.

(Writing by Michael Georgy; editing by Andrew Roche)

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France launches ground campaign against Mali rebels

BAMAKO/PARIS (Reuters) - French troops launched their first ground assault against Islamist rebels in Mali on Wednesday in a broadening of their operation against battle-hardened al Qaeda-linked fighters who have resisted six days of air strikes.

France has called for international support against the Islamist insurgents it says pose a threat to Africa and the West, acknowledging it faces a long fight against the well-equipped fighters who seized Mali's vast desert north last year.

After Islamist pledges to exact revenge for France's intervention, militants claimed responsibility for a raid on a gas field in Mali's neighbor Algeria.

Mauritanian media said an al Qaeda-linked group claimed to have seized as many as 41 hostages, including seven Americans, in the attack, carried out in retaliation for Algeria allowing France to use its air space. Three people, among them one British and one French citizen, were reported killed.

French army chief Edouard Guillaud said his ground forces were stepping up their operation to engage directly "within hours" with the alliance of Islamist fighters in Mali that groups al Qaeda's North African wing AQIM with the country's home-grown Ansar Dine and MUJWA militant movements.

Residents said a column of about 30 French Sagaie armored vehicles advanced toward rebel positions from the town of Niono, 300 km (190 miles) from the capital Bamako. With the Malian army securing the northern border region near Mauritania, Islamist fighters were pinned down in the town of Diabaly.

"Fighting is taking place. So far it is just shooting from distance," said Oumar Ould Hamaha, a spokesman for the MUJWA militants. "They have not been able to enter Diabaly."

West African military chiefs said the French would soon be supported by around 2,000 troops from Nigeria, Chad, Niger and other regional powers - part a U.N.-mandated deployment which had been expected to start in September but was kick-started by the French intervention.

"They are coming to fight and not for a parade. We are coming for battle and that is clear," said Ivory Coast's General Soumaila Bakayoko, who presided over a meeting on the regional force in Bamako.

The first 900 Nigerians would arrive on Thursday he said. Witnesses told Reuters they had seen another 200 troops from Niger waiting to cross into eastern Mali in a convoy including armored vehicles, artillery and fuel tankers.

Chad's Foreign Minister Moussa Faki Mahamat told Radio France International his country alone would send 2,000 troops, suggesting plans for the regional force were already growing.

Military experts say any delay in following up this week's air strikes on Islamist bases with a ground push could allow the rebels to withdraw into the desert, reorganize and mount a counter-offensive.

Guillaud said France's air strikes, involving Rafale and Mirage jet fighters, were being hampered because militants were using the civilian population as a shield.

"We categorically refuse to make the civilian population take a risk. If in doubt, we will not shoot," he said.

Defense Minister Jean-Yves Le Drian acknowledged France faced a difficult operation, particularly in western Mali where AQIM's mostly foreign fighters have camps. Mauritania has pledged to close its porous frontier to the Islamists.

"It's tough. We were aware from the beginning it would be a very difficult operation," Le Drian said.

REGIONAL RISKS

President Francois Hollande said on Tuesday French forces would remain in Mali until stability returned. However France hoped to hand over to African forces in its former colony, "in the coming days or weeks", he added.

The troops from Nigeria and other regional powers will join about 1,700 French troops involved in the operation, part of a contingent expected to reach 2,500 soldiers. France is using Harfang surveillance drones to guide its strikes and also plans to deploy Tiger attack helicopters.

A Malian military source said French special forces units were taking part in the operation.

While many French troops come battle-hardened from Afghanistan, some regional African forces may need to adjust to desert combat far removed from the jungle terrain many are used to. A contingent of some 200 EU military trainers, led by a French general, is not expected before mid-February.

With African states facing huge logistical and transport challenges to deploy their troops, Germany promised two Transall military transport planes to help fly in the soldiers.

Britain has already supplied two giant C-17 military transport planes - larger than France's five C-135 planes - to ferry in French armored vehicles and medical supplies. The United States is considering logistical and surveillance support but has ruled out sending in U.S. troops.

Hollande's intervention in Mali brings risks for eight French hostages held by AQIM in the Sahara as well as the 30,000 French citizens living across West Africa. A French helicopter pilot was killed on Friday, France's only combat death so far.

Even before the attack in Algeria, security experts had warned that the multinational intervention in Mali could provoke a jihadist backlash against France and the West, and African allies.

The conflict in Mali also raised concerns across mostly Muslim West Africa of a radicalization of Islam in the region.

Many inhabitants of northern Mali have welcomed the French attacks against Islamists who have imposed a harsh form of sharia law, cutting off hands and feet for crimes, and destroyed the ancient city of Timbuktu's famed shrines.

The International Criminal Court announced on Wednesday it had launched an investigation into suspected war crimes including murder, mutilation, torture, rape, and executions committed in the north.

Despite the abuses, Mahamadou Abdoulaye, 35, a truck driver who fled from the northern Gao region of Mali into Niger, said the Islamists were still managing to attract recruits.

"We were all afraid. Many young fighters have enrolled with them recently. They are newly arrived, they cannot manage their weapons properly. There's fear on everybody's face," he said.

(Additional reporting by Tiemoko Diallo and Adama Diarra in Bamako, Lamine Chikhi in Algiers, Alexandra Hudson in Berlin; Writing by Joe Bavier and Daniel Flynn; Editing by David Lewis and Andrew Heavens)

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Floods paralyze Indonesian capital, heavy rains continue

JAKARTA (Reuters) - Heavy monsoon rain triggered severe flooding in large swathes of the Indonesian capital, Jakarta, on Thursday, bringing the city to a halt with many government offices and businesses forced to close because staff could not get to work.

At least 20,000 people were forced from their homes in the capital and weather officials warned the rain could get worse over the next few days.

"Rain will continue to fall in the greater Jakarta area ... the potential for flooding remains," a spokesman for the Meteorology Climatology Meteorology and Geophysics Agency told Reuters. He said rain was expected to remain heavy in mountains above Jakarta, often the source of floodwater.

Four people were reported to have been killed, according to the National Disaster Prevention Agency, which urged residents to stay at home to reduce traffic congestion on blocked roads.

Torrential rain was reported across much of the country, including the main island of Java and heavily agricultural area of southern Sumatra.

However, officials said there had been no reports of any serious damage to key crops such as rice, sugar and palm oil.

An estimated more than 175 mm (7 inches) of rain fell in one part of west Jakarta between 7 a.m. and midday.

"In 30 years of my life here it has never flooded, ever. This is the very first time," said Ninuk, 30, a resident of central Jakarta.

Floods even forced the country's anti-corruption agency to move some of its most prominent prison inmates, including a former deputy head of the central bank, to a notorious women's prison, Pondok Bambu, in east Jakarta, a spokesman said

The flooding will put pressure on the capital's popular new governor, Joko Widodo, who came to office last October with promises to work to fix a huge array of basic infrastructure problems that bedevil the city of about 10 million people.

"The government has to do something to prevent floods ... If it needs to build stronger dykes, then build them," said Syaiful Bakhri, a taxi driver whose car was stuck in the flood.

In the centre of Jakarta, where streets are jammed at the best of times, long lines of idled cars waited for waist-deep water to recede. An inflatable dinghy provided by emergency services ferried people to safety across water dividing the heart of the city.

The city's main airport was open but many roads leading to it were reportedly blocked. Most commuter trains and buses were suspended.

The Jakarta Stock Exchange did open but trading was light.

Flooding was even reported at the presidential palace, forcing the postponement of a meeting between President Susilo Bambang Yudhoyono and his visiting Argentine counterpart, Cristina Fernandez.

(Additional reporting by Michael Taylor and Janeman Latul; Writing by Jonathan Thatcher; Editing by Robert Birsel)

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London station briefly evacuated after train fire

LONDON (Reuters) - London's Victoria Station was briefly evacuated during the Thursday rush hour after a fire under a train that was pulling up to a platform, British transport police said.

There were no casualties, a spokesman said, adding the station was being re-opened.

The train was a Gatwick Express service linking central London to the international airport at Gatwick, south of the capital. The train operator said on its Twitter feed that the fire had been put out.

It and other companies operating trains in and out of Victoria - a major transport hub - issued warnings of delays and disruption.

The Victoria incident comes a day after a helicopter clipped a crane and crashed into a road in central London during Wednesday's rush hour, killing two people and causing traffic chaos. Traffic in the Vauxhall area, which is a short distance from Victoria, was still disrupted on Thursday morning.

Thursday's incident caused a flurry of tweets from stressed-out Londoners. "Helicopter crash yesterday and now Gatwick Express on fire at Victoria. What is happening #londonsburning" asked one commuter.

(Reporting by Estelle Shirbon; Editing by John Stonestreet)

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Suu Kyi's party accepts crony donations in reform-era Myanmar

YANGON (Reuters) - Cronies of Myanmar's military junta which kept democracy leader Aung San Suu Kyi under house arrest for nearly two decades have reached a milestone in their quest to rehabilitate their image: they're now donors to Suu Kyi's political party.

While the Nobel Peace laureate's willingness to accept military-tainted funds for education projects might jar with her international image, her supporters praised the move as politically shrewd and financially necessary.

Suu Kyi's opposition party, the National League for Democracy (NLD), accepted 211.5 million kyat ($250,000) at a fundraising concert from companies owned by Western-blacklisted businessmen who made fortunes under the military dictatorship that ruled Myanmar for almost half a century.

The donations have caused barely a stir in Myanmar, a sign of how much Suu Kyi is revered and of how successfully the cronies have repositioned themselves since a reformist government came to power in March 2011. Some see it as a sign of reconciliation after five decades of military misrule.

AGB Bank, owned by self-proclaimed billionaire Tay Za, once described by the U.S. Treasury as "a notorious regime henchman and arms dealer", donated 40 million kyat ($47,000) to Suu Kyi's party at a December concert.

The wife of Kyaw Win, a tycoon who owns the conglomerate Shwe Than Lwin and private television station SkyNet, donated a further 41.5 million kyat ($50,000) in an auction for one of two sweaters knitted by Suu Kyi, while SkyNet itself donated 130 million kyat ($151,430).

"All the money we have raised is for educational purposes, and has nothing to do with the rest of the party," said Myint Myint Sein, who is responsible for the NLD's humanitarian and education policies.

A top official said the party was "very thankful" for the donations. "I am sure all party members are happy about this," said Naing Naing, who sits on the NLD's Central Executive Committee.

Tay Za and many other well-connected businessmen remain on Western blacklists despite the suspension last year of most sanctions against the government following a year of dramatic reforms, including amnesty for hundreds of political prisoners.

Many people loathe and mistrust them for their tacit support of a brutal regime, conspicuous flaunting of wealth and continued domination of many sectors of Myanmar's economy.

"CHANCE TO MEND THEIR WAYS"

Opposition leader Suu Kyi, who spent a total of 17 years under house arrest until she was freed in 2010, defended her actions last week, saying it was better to donate money for good purposes rather than waste it.

"Anybody should be given a chance to mend their ways, no matter how much wrong they have done," she said.

Her association with what she called "those so-called cronies" seems not to have harmed her reputation, already dented by criticisms that she has not stood up for ethnic victims of state-sponsored violence.

Some supporters on Facebook, the main forum for popular political discussion in Myanmar, have nicknamed Suu Kyi "Robin Suu", a reference to the English outlaw Robin Hood who stole from the rich to give to the poor.

"I don't think it is a major scandal," said Mark Farmaner, director of Burma Campaign UK. "We've not seen any evidence yet that receiving donations from cronies is going to have an effect on policy. The NLD don't have many policies to implement yet."

The donations are vital to a party which lacks a mechanism to raise funds from its million-plus members, most of whom are poor.

"In politics, funding is essential to survive," said Derek Tonkin, a former British ambassador to Myanmar. "It has to come from local sources. Provided the 'cronies' fund the right projects, why should we complain? The Burmese people certainly won't."

By accepting donations from Myanmar's richest civilians, Suu Kyi's party is extending a hand to key players in the country's economic recovery, said Trevor Wilson, a former Australian ambassador to Myanmar.

"The cronies have a tremendous economic stake in the future of the country. It's most important to bring them under the rule of law," he said.

Both Suu Kyi and her funders are planning for a 2015 general election, in which the NLD faces an unpopular but well-funded rival party established under the former junta.

(Writing by Paul Carsten; Additional reporting by Min Zayar Oo in Yangon; Editing by Jason Szep and Robert Birsel)

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Firebrand cleric raises fear of "soft coup" in Pakistan

ISLAMABAD (Reuters) - To Pakistan's ruling party, a firebrand cleric camped outside parliament with thousands of protesters is looking more and more like the harbinger of their worst fear: a plan by the military to engineer a "soft coup".

In their eyes, Muhammad Tahirul Qadri seems like the perfect candidate for such a mission. A practiced orator who has electrified crowds with his anti-corruption rhetoric, the doctor of Islamic law leapt into action to back the last power grab by the army in 1999.

The aim this time, some politicians suspect, is to use Qadri to bring down the current administration and provide a pretext for the army to hand pick a caretaker cabinet.

"What we are seeing is dangerous and evidence that unconstitutional third forces are up to their tricks again," said Mahmood Khan Achakzai, a politician who has been a frequent critic of the army's record of interfering in politics.

The military has denied any link to Qadri, and army chief General Ashfaq Kayani has built up a reputation for standing more aloof from politics than predecessors who have not hesitated to dismiss civilian governments. Pakistan has been ruled by the military for more than half of its 65 years as an independent nation.

Critics note, furthermore, that the ruling Pakistan People's Party (PPP), which has a long record of confrontation with the military, has often been quick to portray itself as a victim of bullying by the military to distract attention from its shortcomings.

But the timing of Qadri's return from six years of living in Canada, just a few months before elections are due, and his role in supporting a 1999 coup by former army chief Pervez Musharraf have nonetheless rung alarm bells.

Qadri, who led a convoy of buses carrying thousands of protesters into the capital, Islamabad, on Monday, has repeatedly demanded that the army should have a say in the formation of an interim administration that is due to oversee the run-up to elections in May.

"You meet army officers in the night; I'm asking that you consult with them on the caretaker set up under the sunlight," Qadri said in a speech on Tuesday in remarks clearly addressed to the government.

The PPP's fears over the potential for military meddling centre on the impending formation of a caretaker cabinet.

Pakistan passed a constitutional amendment last year that requires the government and opposition to agree on the composition of the temporary administration.

The amendment is designed to prevent any ruling party exploiting the advantages of incumbency to manipulate elections by using state power to skew the playing field.

The PPP and the Pakistan Muslim League, the main opposition party, have spent months negotiating a list of mutually acceptable names for the transitional cabinet, including a number of politicians noted for resisting military rule.

"The PPP has lost three generations of leaders fighting against dictatorships," said a senior member of the PPP. "You think we will give up now? We will take up this battle at all levels."

CONTEMPT

Military officers privately do little to conceal their contempt for the PPP, whose government has been unable to end militant violence, bring down sharp food price inflation or get the economy on track since it took power in March, 2008.

They are also dismissive of the Pakistan Muslim League.

One officer, speaking in a personal capacity, said the army had no desire to seize power but might be forced to play a role as mediator between political factions if the cleric's protests trigger a prolonged crisis.

"If this gets worse, then the army may have to intervene (as a moderator)," he told Reuters.

After years of suspicion and ill-will between the generals and the PPP-led coalition led by President Asif Ali Zardari, Qadri's protests have seemed to signal a shift in the political landscape, with unpredictable consequences.

"We can't say who is behind him. But all we know is that he can't pull this off without backing from someone," Maulana Fazlur Rehman, the veteran leader of the Jamiat Ulema-e-Islam, Pakistan's biggest religious party, said on television.

The political temperature soared even higher on Tuesday when Chief Justice Iftikhar Chaudhry ordered the arrest of Prime Minister Raja Pervez Ashraf in connection with a corruption case. Authorities have yet to carry out his instructions.

An aide to Ashraf said the military was behind this move as well, but the chief justice is known to be independent-minded.

If Qadri succeeds in bringing down the government, then a man whose name had faded from the limelight since he left Pakistan for Canada in 2006 will have sabotaged the PPP's bid to be the first civilian government to complete a full term.

That would undermine Pakistan's struggle to bury the legacy of decades of military dictatorship by building institutions strong enough to resolve the nuclear-armed country's multiple crises.

The military has a track record of picking interim administrations in past decades that have then overstepped their mandates by hounding the army's political opponents or manipulating elections.

Army officers in Bangladesh, which was part of Pakistan until it broke away in 1971, have used a similar approach to appoint a technocratic government to implement reforms.

But some commentators and Western diplomats argue that times have changed and the military has lost the appetite for embroiling itself in struggles with increasingly assertive political parties and a hyperactive media.

"The military has no interest in disrupting the path to elections: in fact their interest is the opposite, supporting the transfer of power from one elected government to another, which is a political milestone in Pakistan's history," said Maleeha Lodhi, a former Pakistani ambassador to Washington.

Much will depend on whether Qadri has enough rhetorical firepower left to persuade his followers to maintain their protest, or whether the government decides to order the police to apply pressure to disperse them.

"There is nothing wrong with raising your concerns and protesting," said Information Minister Qamar Zaman Kaira. "But if you try to hold the capital hostage and disrupt the lives of its people, the law will take its course."

(Additional reporting by Michael Georgy and Mubasher Bukhari; Editing by Michael Georgy, Raju Gopalakrishnan and Robert Birsel)

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Massacre of over 100 reported in Syria's Homs

BEIRUT (Reuters) - More than 100 people were shot, stabbed or possibly burned to death by government forces in the Syrian city of Homs, a monitoring group said on Thursday, and fierce fighting raged across the country.

The British-based Syrian Observatory for Human Rights said women and children were among the 106 people killed by forces loyal to President Bashar al-Assad forces who stormed Basatin al-Hasawiya, a poor district on the edge of Homs, on Tuesday.

The massacre in the central city came the same day twin explosions killed over 80 people at Aleppo's university in the north, according to the group.

Reuters cannot independently confirm reports due to reporting restrictions in Syria.

Syrian warplanes and troops pursued a countrywide offensive on Thursday, activists and state media said, bombing rebel-held areas and clashing with insurgents who have pushed into cities.

Government forces clashed on Thursday with insurgents in the cities of Deraa, Hama, Homs, Aleppo, Damascus and east of Deir al-Zor, the Observatory said. Only the coastal Assad strongholds of Latakia and Tartous were spared violence.

Opposition activists said 15 people, including 7 children, were killed when an air strike hit a family home in Husseiniyeh, a suburb on the outskirts of the capital.

They sent Reuters footage of people dragging the limp bodies of children out of the rubble.

In Hama province, the government said it had secured some areas and displaced families were returning to the area of Zor Abi Zaid after armed forces "cleansed the area completely of terrorists", a term authorities use for the rebels.

Activists and Turkish news agencies reported renewed clashes on the Syrian border town of Ras al-Ain, where rebel forces have been fighting armed Kurdish groups for control.

The local Turkish Dogan news agency said one man on the Turkish side of the border was wounded by a stray bullet overnight and that schools in the area had been closed due to the clashes on the Syrian side.

In the power vacuum, some Kurdish groups are trying to assert control over parts of Syria through fights with rebels and government forces. The Observatory said clashes broke out between Kurdish militants and the Syrian army in Rameilan, a town in the northeast.

FAMILY OF 17 REPORTED KILLED

Activists said 17 members of the Khazam family had been killed during Tuesday's raid on Basatin al-Hasawiya.

"The Observatory has the names of 14 members of one family, including three children, and information on other families who were completely killed, including one of 32 people," Rami Abdelrahman, head of the Observatory, told Reuters.

"This needs to be investigated by the United Nations," said Abdelrahman, a Syrian who has documented human rights violations in Syria since 2006 and now reports on killings by both sides.

The United Nations says 60,000 have been killed in the 22-month-old conflict. Several massacres have been reported, most blamed on pro-Assad forces but some also on rebel fighters.

The town of Houla in Homs province was the scene in May 2011 of the killings of 108 people, including nine children and 34 women, which U.N. monitors blamed on the army and pro-Assad militia.

The United Nations sent observers to Syria in April 2011 but after several attacks on their convoys they left in August, complaining both sides had chosen the path of war.

Abu Yazen, an opposition activist in Homs, said the rebel Free Syrian Army occasionally entered the farmland of Basatin al-Hasawiya to attack a nearby military academy.

"Assad's forces punish civilians for allowing the rebels to enter the area," he said. Other activists said the raid was carried out by pro-Assad militia.

The government and opposition blame each other for two explosions at Aleppo's university on Tuesday which killed at least 87 people, many of them students attending exams, in the deadliest attack on civilians to hit the commercial hub since rebels laid siege to it over the summer.

U.S. ambassador to the United Nations Susan Rice said the attack was "beyond horrific".

"According to eyewitnesses, regime jets launched the strikes," she said on her Twitter account.

Russia, which has backed Assad throughout the revolt both in rhetoric and through its veto of U.N. Security Council resolutions condemning Assad, dismissed suggestions Damascus was behind the explosions.

"I cannot imagine any bigger blasphemy," Russian Foreign Minister Sergei Lavrov told journalists during a visit to Tajikistan.

(Additional reporting by Erika Solomon and Alex Dziadosz in Beirut, Roman Kozhevnikov in Dushanbe, Russia, Michelle Nichols at the United Nations and Jonathon Burch in Ankara; Editing by Andrew Roche)

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Algerian forces launch operation to break desert siege

ALGIERS (Reuters) - Twenty-five foreign hostages escaped and six were killed on Thursday when Algerian forces launched an operation to free them at a remote desert gas plant, Algerian sources said, as one of the biggest international hostage crises in decades unfolded.

The standoff began when gunmen calling themselves the Battalion of Blood stormed the gas facility on Wednesday morning. They said they were holding 41 foreigners and demanded a halt to a French military operation against fellow al Qaeda-linked Islamist militants in neighboring Mali.

The raid increased fears that jihadist militants could launch further attacks in Algeria, a vast desert country with large oil and gas reserves that is only just recovering from a protracted conflict with Islamist rebels during the 1990s which cost an estimated 200,000 lives.

Fast-moving details of the military operation to free the hostages from the gas plant were difficult to confirm. Algeria's official APS news agency said about half the foreign hostages had been freed.

A local source told Reuters six foreign hostages were killed along with eight captors when the Algerian military fired on a vehicle being used by the gunmen.

Mauritania's ANI news agency, which has been in constant contact with the kidnappers, said seven hostages were still being held: two Americans, three Belgians, one Japanese and one British citizen.

It quoted one of the kidnappers as saying that Algerian ground forces were trying to fight their way into the complex.

ANI and Qatar-based Al Jazeera reported that 34 of the captives and 15 of their captors had been killed when government forces fired from helicopters at a vehicle. Those death tolls, far higher than confirmed by the local source, would contradict the reports that large numbers of foreigners escaped alive.

Britain and Norway, whose oil firms BP and Statoil run the plant jointly with the Algerian state oil company, said they had been informed by the Algerian authorities that a military operation was under way but did not provide details.

As many as 600 Algerian workers at the site managed to flee, the official Algerian news agency said.

RAISING THE STAKES

The incident dramatically raises the stakes in the French military campaign in neighboring Mali, where hundreds of French paratroopers and marines are launching a ground offensive against rebels after air strikes began last week.

Algerian Interior Minister Daho Ould Kablia said the kidnappers were led by Mokhtar Belmokhtar, a veteran Islamist guerrilla who fought Soviet forces in Afghanistan in the 1980s and had set up his own group in the Sahara after falling out with other local al Qaeda leaders.

A holy warrior-cum-smuggler dubbed "The Uncatchable" by French intelligence and "Mister Marlboro" by some locals for his illicit cigarette-running business, Belmokhtar's links to those who seized towns across northern Mali last year are unclear.

The hostage takers earlier allowed some prisoners to speak to the media, apparently to put pressure on Algerian forces not to storm the compound. An unidentified hostage who spoke to France 24 television said prisoners were forced to wear explosive belts and captors had threatened to blow up the plant.

A local source told Reuters the hostage takers had blown up a petrol filling station at the plant.

Two hostages, identified as British and Irish, spoke to Al Jazeera television and called on the Algerian army to withdraw from the area to avoid casualties.

"We are receiving care and good treatment from the kidnappers. The (Algerian) army did not withdraw and they are firing at the camp," the British man said. "There are around 150 Algerian hostages. We say to everybody that negotiations is a sign of strength and will spare many any loss of life."

Ireland said later that the Irish hostage was among those freed.

NUMBERS UNCONFIRMED

The precise number and nationalities of foreign hostages could not be confirmed, with some countries reluctant to release information that could be useful to the captors.

Britain said one of its citizens was killed in the initial storming on Wednesday and "a number" of others were held.

The militants said seven Americans were among their hostages, a figure U.S. officials said they could not confirm.

Norwegian oil company Statoil said nine of its Norwegian staff and three Algerian employees were captive. Britain's BP, which operates the plant with Statoil and Algerian state oil company Sonatrach, said some of its staff were held but would not say how many or their nationalities.

Japanese media said five workers from Japanese engineering firm JGC Corp. were held, a number the company did not confirm. Paris has not said whether any hostages were French. Vienna said one hostage was Austrian, Dublin said one was Irish and Bucharest said an unspecified number were Romanian.

Spanish oil company Cepsa said it had begun to evacuate personnel from elsewhere in Algeria, an OPEC member.

Paris said the Algeria attack demonstrated it was right to intervene in Mali: "We have the flagrant proof that this problem goes beyond just the north of Mali," French ambassador to Mali Christian Rouyer told France Inter radio.

President Francois Hollande has received public backing from Western and African allies who fear that al Qaeda, flush with men and arms from the defeated forces of Libya's Muammar Gaddafi, is building a desert haven in Mali, a poor country helpless to combat fighters who seized its north last year.

However, there is also some concern in Washington and other capitals that the French action in Mali could provoke a backlash worse than the initial threat by militants in the remote Sahara.

The militants, communicating through established contacts with media in neighboring Mauritania, said they had dozens of men armed with mortars and anti-aircraft missiles in the compound and had rigged it with explosives.

"We hold the Algerian government and the French government and the countries of the hostages fully responsible if our demands are not met, and it is up to them to stop the brutal aggression against our people in Mali," read one statement carried by Mauritanian media.

They condemned Algeria's secularist government for letting French warplanes fly over its territory to Mali and shutting its border to Malian refugees.

PRESSING ON

The attack in Algeria did not stop France from pressing on with its campaign in Mali. It said on Thursday it now had 1,400 troops on the ground in Mali, and combat was underway against the rebels that it first began targeting from the air last week.

"There was combat yesterday, on the ground and in the air. It happened overnight and is under way now," said Le Drian. Residents said a column of about 30 French Sagaie armored vehicles set off on Wednesday toward rebel positions from the town of Niono, 300 km (190 miles) from the capital, Bamako.

The French action last week came as a surprise but received widespread international support in public. Neighboring African countries planning to provide ground troops for a U.N. force by September have said they will move faster to deploy them.

Nigeria, the strongest regional power, sent 162 soldiers on Thursday, the first of an anticipated 906.

"The whole world clearly needs to unite and do much more than is presently being done to contain terrorism, with its very negative impact on global peace and security," President Goodluck Jonathan said.

Germany, Britain and the Netherlands have offered transport aircraft to help ferry in African troops. Washington has said it is considering what support it can offer.

Many inhabitants of northern Mali have welcomed the French action, though some also fear being caught in the cross-fire. The Mali rebels who seized Timbuktu and other oasis towns in northern Mali last year imposed Islamic law, including public amputations and beheadings that angered many locals.

A day after launching the campaign in Mali, Hollande also ordered a failed rescue in Somalia on Saturday to free a French hostage held by al Qaeda-linked al Shabaab militants since 2009. Al Shabaab said on Thursday it had executed hostage Denis Allex. France said it believed he died in the rescue.

(Reporting by Lamine Chikhi; Writing by Peter Graff; Editing by Giles Elgood)

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UK policewoman guilty of misconduct over call to Murdoch tabloid

LONDON (Reuters) - A senior British counter-terrorism police officer was found guilty on Thursday of misconduct in public office over a call to the News of the World to discuss an investigation into phone-hacking by its reporters.

April Casburn, 53, a detective chief inspector, rang up the tabloid newspaper on September 11, 2010, and disclosed various details of a confidential police probe that had just been launched and was the subject of intense media speculation.

Casburn's case was the first criminal trial to arise out of a web of police investigations connected to the hacking scandal, which was in its early stages in September 2010 but later escalated into a much wider crisis affecting British media, politics and police. The News of the World was shut down by its owner, Rupert Murdoch, in July 2011.

The prosecution accused Casburn of asking the paper for money and said her call was a "malicious" attempt to undermine the investigation because of her perception that she had been wronged and sidelined by police colleagues.

Casburn denied asking for payment. She said her intention was to raise the alarm over what she viewed as a waste of counter-terrorism resources on hacking when they should have been concentrating on preventing attacks in the run-up to the anniversary of the September11, 2001, attacks on the United States.

She testified that she had been incensed by the attitude of senior officers who regarded the hacking probe as "a bit of a jolly" because it was an opportunity to interview celebrity hacking victims like the actress Sienna Miller.

After hearing three days of evidence and arguments, a jury at London's Southwark Crown Court returned a verdict of guilty on one count of misconduct in public office, the Press Association reported.

Casburn will be sentenced later.

"WANTS TO SELL INSIDE INFO"

Casburn was head of a counter-terrorism financial investigations unit at the time when she made the telephone call that led to her trial.

The hacking scandal was revving up after a New York Times article on September 1, 2010, alleged widespread wrongdoing at the paper. The police were under intense pressure to investigate the allegations contained in the article.

There is no recording of Casburn's call to the News of the World newsdesk early on a Saturday morning, but the reporter who took her call wrote a summary of what she said in an email he sent to his editor a quarter of an hour afterwards.

The reporter, Tim Wood, wrote that Casburn wanted "to sell inside info". Casburn denied this in court, saying Wood must have misheard or misunderstood. Her lawyer suggested that he may have jumped to the conclusion that she wanted money because it was common practice at the paper to pay for stories.

Wood's email said Casburn had disclosed that police wanted to interview six people connected to the News of the World including Andy Coulson, a former editor of the paper who by then was head of communications for Prime Minister David Cameron.

Casburn argued that this was not damaging to the police investigation because the six people's names had been all over the papers for more than a week and it was widely expected that police would talk to them.

But the prosecution said it was "disgraceful" for a senior police officer to reveal any inside information about an investigation to the very newspaper that was the subject of the police's interest.

Regardless of whether she wanted money for the information or not, the prosecution said the phone call was a gross breach of the public trust in the police.

(Reporting by Estelle Shirbon; Editing by Steve Addison)

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Venezuela's sick Chavez misses own inauguration bash

CARACAS (Reuters) - Venezuelan President Hugo Chavez stayed on his sickbed in Cuba on Thursday while supporters rallied in his honor on the day he should have been sworn in for a new six-year term in the South American OPEC nation.

The postponement of the inauguration, a first in Venezuelan history, has laid bare the gravity of Chavez's condition after complications from a fourth cancer operation in his pelvic area.

It has also left his chosen heir, Vice President Nicolas Maduro - a former bus driver who shares his boss's radical socialist views - in charge of day-to-day government until there is clarity over whether Chavez will recover.

"People traveling on foot, the humble, the patriots ... we're going to demonstrate, one proud people with one slogan: we are all Chavez!" Maduro said, rallying supporters.

The president, whose legendary energy and garrulous dominance of the airwaves had often made him seem omnipresent in Venezuela since taking power in 1999, has not been seen in public nor heard from since his surgery on December 11.

Venezuela's 29 million people are anxiously watching what could be the last chapter in the extraordinary life of Chavez, who grew up in a rural shack and went on to become one of the world's best-known and most controversial heads of state.

The saga also has huge implications for the likes of Cuba and other leftist allies in Latin America that have benefited for years from Chavez's subsidized oil and other largesse.

A clutch of foreign friends, including the presidents of Uruguay, Bolivia and Nicaragua, were attending Thursday's events in Caracas despite Chavez's absence.

"We have to express our solidarity at this enormously difficult time for a man who remembered my people, who did not turn his back," said Uruguayan President Jose Mujica, referring to Chavez's aid policies around Latin America.

"You hardly see that sort of solidarity anywhere in the world ... Chavez's mark is a deep one, and let's hope he can overcome illness," the former leftist guerrilla told Telesur, a TV network set up by Chavez to counter Western media influence.

OPPOSITION ANGER

Red-clad supporters began arriving in the streets around the presidential palace in the early morning, waving banners and photos of Chavez, and chanting some of his best-known slogans.

The Miraflores palace has been the scene of some of the biggest dramas of Chavez's rule, from protests in 2002 and a coup that toppled him briefly, to speeches after election wins and emotional returns from previous cancer treatments in Havana.

Venezuela's opposition leaders are furious at what they see as a Cuban-inspired manipulation of the constitution by Maduro, Cabello and other Chavez allies aimed at preventing the naming of a caretaker president due to Chavez's absence on Thursday.

Henrique Capriles, who lost October's presidential election to Chavez, said the opposition had no plans to risk violence by encouraging supporters to hold a counter-demonstration.

"Not calling people onto the streets is not a sign of weakness, but of responsibility," he told reporters. "Who wins from a conflict scenario? They win, the pseudo-leaders who are not the owners of the country, nor of its sovereignty."

The U.S. Embassy in Caracas advised American citizens in Venezuela to exercise caution during the next few days.

A top Venezuelan military officer told state TV the borders were being reinforced and security forces were patrolling to bring people "a sense of peace and tranquility."

With government updates short on details, little is known about Chavez's actual medical condition and rumors are flying.

The government's version is that Chavez suffered complications including a severe lung infection after the latest surgery. But speculation is rife on Twitter that he may be on life support or at risk of major organ failure.

He has undergone four operations, as well as weeks of chemotherapy and radiation treatment, since being diagnosed with an undisclosed type of cancer in his pelvic area in June 2011.

He looked to have staged a remarkable recovery from the illness last year, winning a new six-year term in a hard-fought election in October. But within weeks of his victory he had to return to Havana for more treatment.

'REVOLUTION MUST CONTINUE'

In contrast with previous trips to Cuba, the government has not released any photos or video of him recuperating, and Chavez has not made any phone calls home to state media, fueling the impression that his condition is dire.

Though supporters maintain vigils and express hope he will recover, there appears to be a growing acceptance he may not, and a slow adjustment to the idea of a post-Chavez Venezuela.

"We are all necessary but nobody should be irreplaceable and the revolutionary process in our America must continue," said one friend and close ally, Ecuador's President Rafael Correa.

Though often viewed in the West as a clownish autocrat, Chavez has a kinder image in developing nations where many admire his defiance of the United States and efforts to improve the lives of Venezuela's poor.

At home, Chavez has a cult-like appeal for many in the slums due to his "anti-imperialist" rhetoric, his pumping of crude oil revenue into welfare projects, and his own humble background.

But Venezuela is deeply split, with opponents saying he has squandered an unprecedented bonanza of oil money with misguided policies. They also accuse him of allowing corruption to flourish and oppressing political opponents and media critics.

Should Chavez die or step down, a new election would be called and it would likely pit Maduro against opposition leader Capriles, the 40-year-old governor of Miranda state.

Analysts say Maduro would be hard to beat given Chavez's personal blessing and the emotional outpouring from supporters if the president were forced to leave office, though past polls have shown Capriles to be more popular than the vice president.

In a sign a Maduro-led government would not let up on Chavez's tough treatment of foes, the state telecommunications regulator told opposition TV station Globovision it was beginning punitive proceedings against it for causing "anxiety" with its coverage of the president's health.

Western investors generally hope for a more business-friendly government in Venezuela so prices of its widely traded bonds have soared over the last few weeks on Chavez's health woes. But they dipped this week as their expectations of a quick change apparently dimmed. (Additional reporting by Malena Castaldi in Montevideo; Editing by Kieran Murray and Vicki Allen)

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Two separate bombs kill 32, hurt 100 in Pakistan cities

QUETTA/PESHAWAR, Pakistan (Reuters) - Bomb blasts in two Pakistani cities killed 32 people and injured more than 100, police and hospital officials said.

A bomb in Quetta, the capital of the eastern province of Balochistan, killed 11 people and injured more than 40, police officer Zubair Mehmood said. A local militant group claimed responsibility.

Another 21 were killed and more than 60 injured in a bombing where people had gathered to hear a religious leader speak in Mingora, the largest city in the northwestern province of Swat, police and officials at the Saidu Sharif hospital said.

"The death toll may rise as some of the injured are in critical condition and we are receiving more and more injured people," said Dr. Niaz Mohammad.

Police initially said the Swat blast was caused by an exploding gas cylinder but later police chief Akhtar Hayat said it was a bomb.

It has been more than two years since a militant attack has claimed that many lives in Swat.

The mountainous region, formerly a tourist destination, has been administered by the Pakistani army since their 2009 offensive drove out Taliban militants who had taken control.

But the Taliban retain their ability to mount attacks in Swat and shot schoolgirl campaigner Malala Yousufzai in Mingora last October.

The bomb in a market in Quetta targeted a police patrol and mostly killed sellers of vegetable and second-hand clothes, officer Mehmood said.

Three police officers nearby were injured and a child was among the dead, he said.

The United Baloch Army claimed responsibility for the blast.

The group is one of several who are fighting for independence for Balochistan, an arid and impoverished region with substantial gas, copper and gold reserves.

It constitutes just under half of Pakistan's territory and is home to about 8 million of the country's population of 180 million.

Human rights groups say hundreds of bodies have been recovered in the region since 2011. Many have broken limbs, cigarette burns or other signs of torture. Local activists blame the security services.

The state denies the accusations and says that insurgents sometimes put on military uniforms before kidnapping people.

Sectarian attacks are also on the rise, and militant groups frequently bomb or shoot Shia passengers on buses travelling to neighboring Iran.

(Writing by Katharine Houreld; Editing by Louise Ireland)

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Syria overshadows Iran charm offensive in Egypt

CAIRO (Reuters) - Shi'ite Iran, increasingly isolated over its nuclear programme, tried to improve ties with Egypt on Thursday, playing down differences over Syria and seeking to reduce sectarian tensions by courting the country's top Sunni scholar.

Iran has been at odds with the Arab world's most populous nation since Tehran's Islamic revolution in 1979. But a new era of Egyptian politics that followed the 2011 overthrow of Hosni Mubarak has led to more contacts.

In Cairo for talks with President Mohamed Mursi and others, Iranian Foreign Minister Ali Akbar Salehi praised Egypt's revolution and its new, Islamist-led government.

He also met Sheikh Ahmed Al-Tayeb, the Grand Sheikh of Al-Azhar - one of the most prestigious seats of learning in the Sunni world.

The two men stressed the importance of Muslim unity and Salehi said there were no differences between Muslims, whether they were Sunnis or Shi'ites.

"Egypt and Iran are among the most important states in the Middle East, with influence in the region, and they can complete each other in the fields of economy and trade," Salehi told Egyptian state television in an interview.

During his 30 years in power Mubarak was deeply suspicious of Islamist-led Iran and never visited Tehran.

The countries took opposite paths: Egypt concluded a peace treaty with Israel while becoming a close ally of the United States and Europe, while Iran positioned itself as the center of opposition to Western influence in the region.

In a break from the Mubarak era, Mursi went to Tehran last year in one of his first official trips as leader.

But Syria remains the main stumbling block. Tehran is one of the last and staunchest allies of Syrian President Bashar al-Assad, whereas Egypt wants Assad to relinquish power to stop the protracted civil war. Analysts said Mursi believes Iran's ties with the Arab world hinge on a review of its support for Assad.

COMMON GOALS

Addressing reporters after talks, Salehi and his Egyptian counterpart Mohamed Kamel Amr sought to sidestep thorny issues and instead emphasized their common goals.

Salehi dismissed the notion of Sunni-Shi'ite tensions in regional affairs, describing it as an invention of Western media. He conveyed President Mahmoud Ahmadinejad's greetings to Mursi, and said the Egyptian leader had been invited to Iran again.

" The neighboring states and the states of the region must seek a way to solve to the Syrian issue in a Syrian-Syrian way," Salehi said.

Yet, with their positions on Syria diametrically different, it is unclear how much real progress Iran's new charm offensive could achieve. No trade or cooperation agreements were signed as part of Salehi's visit.

Suspected by the West to be developing a nuclear bomb - which it denies - Iran has found itself increasingly isolated due to economic sanctions and a diplomatic push against it.

It desperately needs new friends in the region, particularly since Israel and the United States have not ruled out military action against Tehran.

The Mursi administration has included Iran in a regional initiative on Syria, though so far efforts to bring together Iran, Saudi Arabia and Turkey have made no obvious progress.

"Some might see that this initiative is not moving, but in truth the contacts are continuing at different levels and it is still, in truth, the initiative that can bring fruit and halt the bloodshed," said Amr.

"We still see that Iran is a party in the quartet initiative and has a role that it can play." (Additional reporting by Marcus George in Dubai; Writing by Maria Golovnina/Tom Perry; Editing by Giles Elgood)

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